On 25 October, Theresa May overturned government plans to cap rents for supported housing, but new funding plans will make things worse.
Photograph: -/AFP/Getty Images

On 25 October, a long campaign of lobbying against the government’s plan to restrict housing benefit payments for supported housing schemes seemed to have worked. Just hours before a Labour-led debate on welfare reform was due to start, Theresa May announced to the Commons that the policy of capping supported housing rents was being abandoned.

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Apparently acknowledging the sector’s concerns, May said it was important to get the funding model right for supported housing, “so all providers of supported housing are able to access funding effectively”.

The announcement was widely described by the media (including The Guardian) as “a major climbdown”. The shadow housing minister, John Healey, said his party was winning the arguments and making the running on government policy. It seemed that the crisis had been averted. The housing sector breathed a collective sigh of relief.

But while May announced the abandonment of one policy, she did not actually announce what the new policy would be until 31 October, with considerably less fanfare and virtually no media coverage. This was, no doubt, the government’s intention - get everyone to focus on the fact that you’ve made a u-turn, which the media always love, so no-one is pays attention when you announce what the replacement policy is, which is a bit more technical and therefore less interesting.

The previous policy had been driven solely by former chancellor George Osborne’s commitment to drive down the housing benefit bill, specifically, the housing benefit bill for supported housing. It seemed to be assumed by everyone that when May said the government would not apply the local housing allowance (LHA) cap to supported housing, and followed this up with her comments about the need for funding stability, she was abandoning the previous, ideologically-driven commitment to cutting funding and preparing the way for the announcement of a more generous policy that would genuinely provide greater financial security to supported housing providers. That would, indeed, have been a massive u-turn.

But that is not what was announced.

Supported housing is now going to be divided into long-term supported housing for people, such as older people or and disabled people, who are likely to require support for longer than two years, and short-term-supported housing for people, such as rough sleepers and homeless people, who should require support for less than two years.

While proposals for future funding arrangements for long-term supported housing have been broadly welcomed, the proposal now being made for short-term supported housing is, if anything, worse than what was originally proposed.

It is true that in future housing benefit payments to short-term supported housing schemes will not be capped at LHA levels – but that is only because housing benefit payments are going to be withdrawn altogether. They are to be replaced by a system of block grants administered by local authorities, but with no indication given as to what level those grants will be at.

There are two points here. First, housing benefit is a statutory entitlement whereas the new grants will be discretionary. Clearly, this makes a huge difference to the stability of supported housing providers’ funding. At the moment, when a supported housing space is filled and the rent has been deemed reasonable when objectively assessed compared to rents for other similar types of accommodation in the area, the rent has to be met by housing benefit. Once local authorities have discretion over how much to pay, how long for, and even whether to pay a particular provider at all, any form of long-term financial planning becomes impossible for housing providers.

But in addition, the new system will place a new, ongoing responsibility on local authorities to secure value for money. Supported housing providers have had experience of what this means in reality. Back in 2003 the then-Labour government launched new funding arrangements for supported housing called the Supporting People framework. Funding was administered by local councils and paid directly to support providers in the form of discretionary block grants. And it worked. Homelessness and rough sleeping both fell.

But it didn’t last. Councils were told by central government that they needed to secure better value for money from their grants. Compulsory competitive tendering processes were engineered that meant that, instead of going up in line with inflation, discretionary grants began to be frozen, then cut, and in some cases withdrawn altogether. Then the ringfence on the funding was removed so local councils didn’t even have to use it to fund support anymore. In an era when local councils were facing huge cuts in other budgets, suddenly finding they had a big pot of money over which they had complete discretion proved an irresistible temptation. Suffice to say, the Supporting People system was slowly dismantled. The result? Every year since 2010 homeless and rough sleeping have increased.

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All the issues which caused the collapse of that system remain unaddressed in the government’s new proposals. In addition, while from 2020, rent levels in general needs housing will increase by a guaranteed CPI + 1% every year, there is no proposal to index-link future funding levels in supported housing.

Given all this, why would any provider commit to providing short-term supported housing rather than general housing?

Nor – contrary to May’s pledge - is there any proposal to provide long-term security of funding at all. Reviewing who might receive and not receive one of the new grants will be solely at the discretion of the local authority. Why would a bank lend money to fund a new supported housing scheme or the refurbishment of an existing one if the scheme’s funding might be frozen, cut, or even withdrawn altogether at any point?

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In short, rather than a change of direction, the new proposals turbocharge the government’s commitment to slashing the bill for supported housing.

It is not a climbdown, it is a stepping up of the previous policy. And instead of making the situation better, the so-called u-turn threatens to make it immeasurably worse.

Alan Fraser is chief executive of YMCA Birmingham.

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